Horizontal BPO in North American Financial Services

Transcription

1 A Datamonitor report Strategic scope drives renewed growth in horizontal BPO services Published: Oct-05 Product Code: Providing you with: In-depth discussion of human resources, finance and accounting and procurement outsourcing services Use this report to... Understand drivers and barriers to take-up to enhance sales success in the FS horizontal BPO market segment Detailed analysis of horizontal BPO vendors operating in the North American financial services market Spending forecasts to 2008 for individual horizontal BPO segments across the North American financial services sector

2 Introduction Horizontal BPO services are, overall, further advanced in terms of market development than the more sector-specific vertical BPO services. While a great deal of this development has happened in a service bureau or managed service set-up in the past, future growth will be driven by strategic horizontal BPO which emphasizes cross-functionality and process transformation. Key findings and highlights The transformation of business processes to increase operational efficiency is a major reason why banks consider BPO. Lowering unit costs is by far the greatest driver, illustrating that vendors in the strategic BPO space must compete on costs and that the ability to transform processes alone is unlikely to be enough to compete in this market. In financial markets, the focus on increasing operational efficiency as revenues decrease is initiating new operational practices and is contributing to the take-up of BPO. However, the complexity of line of business-oriented organizational structures has resulted in a slower uptake than in retail banks or insurers. Procurement is set to grow from a low base and will be characterized by a few large deals dominating the market. This space will show an increase in strategic deals drawing on a large single category client base. Procurement BPO in insurance will show the fastest growth, driven by a focus on improving efficiency in the claims fulfillment process. Reasons to buy Understand drivers and barriers to take-up to enhance sales success in the FS horizontal BPO market segment Improve positioning in the horizontal BPO market with detailed knowledge of competitors and market perceptions Understand the dynamics and growth potential of outsourced central enterprise services to improve marketing and sales efficiency Contact us... From Europe: tel: fax: tcmarketing@datamonitor.com From Germany: tel: fax: deinfo@datamonitor.com From the US: tel: fax: ustcmarketing@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

3 Sample pages from the report The Future Decoded Line of business trends: retail banking to grow most over period Figure 14: Line of business horizontal BPO growth in financial services, Forecast growth rates, CAGR % 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Financial markets Market Context Insurance Continued cost-consciousness is driving the transformation of business processes as Retail banking banks look for new ways of increasing operational efficiency. Figure 8 illustrates that this transformation is a major reason why retail banks would consider BPO. Lowering unit costs is by far the greatest driver, however, illustrating that vendors in the strategic horizontal space must compete on costs and that the ability to transform business processes alone is unlikely to be enough to compete in this market Market Financial Size 2004 Markets $m Market Context IT strategy will continue to be dominated by a balanced approach, with FSIs looking Source: Datamonitor D A T A M O N I T O R to reduce costs in areas where revenues are uncertain, for example, in capital markets, while following a strategy of driving business growth in areas where opportunities remain and revenues look and set a to softening increase, market, as in for commodities. example, fixed BPO annuities, the focus on cost control and services spend per line of business, Table 2: Horizontal BPO take-up will increase (figure 9) as new improving ways are operational sought to improve efficiency efficiency will continue. and Datamonitor believes that the drive to 2008 keep costs under control in those areas find where new revenues operational are practices increasing. to reduce However, costs will increase horizontal BPO uptake in Datamonitor believes that true strategic horizontal this sector. BPO in financial markets is likely to CAGR $m 2004 represent only a small portion of this space, where the LOB-oriented structure makes implementing this kind of deal difficult. Whilst HRO is one of the most mature outsourcing areas, it is also the area which % Retail banking 390 Insurance % most insurers are considering outsourcing in the future. Datamonitor believes that Financial markets % strategic deals spanning the whole HR function are significantly contributing to the increase in the number of FSIs considering HRO, with the emphasis shifting away Source: Datamonitor Figure 9: Which area of T outsourcing A M O I T from O R would task-specific be top expertise priority? to a focus on transformational deals potentially spanning D A N 35.0% several function areas. F&A outsourcing, while a far less mature market, is also likely to see strong growth driven by transformation-led deals. 30.0% 25.0% Retail banking 20.0% The drive to increase operational efficiency and continued cost-consciousness will continue to characterize IT strategy in this sector as revenues continue to be less 15.0% certain, particularly in the consumer lending and mortgage market. However, growth Datamonitor (Published 09/2005) Page opportunities 37 remain, for example, corporate lending with retail banks following a 10.0% strategy to support business growth in these areas leading to a balanced strategy as This report is a licensed product and is not to be photocopied a whole. 5.0% Figure 8: Which is the most important factor that would drive you to 0.0% Datacenter BPO Network Application consider Desktop business Application process outsourcing? Outsourcing Managemenmenmenment Allows us to benefit from Develop- Manage- Manage- Source: Financial Markets Technology Executive Perspectives Vendor s offshore capability Allows us to move D A T towards A M O N I T O R (2005) DMTC1131 variable rather than fixed Others costs Allows vendor to transform business processes Datamonitor (Published 09/2005) No clear benefit Page 18 This report is a licensed product and is not to be photocopied Lower unit costs Allows us to devote more resource to core competencies Source: Datamonitor s US retail banking technology spending strategies (2004) DMTC1077 D A T A M O N I T O R Datamonitor (Published 09/2005) Page 17 This report is a licensed product and is not to be photocopied Request more sample pages...for FREE! From Europe: tel: fax: tcmarketing@datamonitor.com From Germany: tel: fax: deinfo@datamonitor.com From the US: tel: fax: ustcmarketing@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

4 Table of contents EXECUTIVE SUMMARY MARKET CONTEXT Key findings - Human resources outsourcing - Finance and accounting outsourcing - Procurement outsourcing Drivers and trends - IT strategy drivers Insurance Retail banking Financial markets - Moving to strategic BPO - Centralized shared service structures - Increasing vendor credibility - Regulation - Global sourcing strategies COMPETITIVE DYNAMICS Key findings Competitor identification - General outsourcing providers - Enterprise services outsourcing experts Competitive structure - Niche providers - Key BPO providers - Process experts - Horizontal BPO champions - Emerging competitors THE FUTURE DECODED Key findings Outsourcing market segments: Procurement to grow fastest Line of business trends: Retail banking to grow most over period - Retail banking - Insurance - Financial markets APPENDIX TABLES Table 1: Horizontal BPO segment growth in financial services, Table 2: Horizontal BPO services spend per line of business, FIGURES Figure 1: Executive Summary Market context Figure 2: Executive Summary Competitive dynamics Figure 3: Executive Summary The future decoded Figure 4: Human resources outsourcing Figure 5: Finance and accounting outsourcing Figure 6: Procurement outsourcing Figure 7: What will be the primary drivers of your IT strategy in 2005? Figure 8: Which is the most important factor that would drive you to consider business process outsourcing? Figure 9: Which area of outsourcing would be top priority? Figure 10: Do you currently use offshore outsourcing or are you likely to consider it in the future? Figure 11: Vendor heatmap Figure 12: Competitive positioning Figure 13: Horizontal BPO segment growth in financial services, Figure 14: Line of business horizontal BPO growth in financial services, An increasing interest is being shown by the main outsourcers in several of the main horizontal BPO areas. This is driven especially by the increasing demand for end-to-end services rather than individual sub-functions. The backgrounds of these vendors lend themselves well to the challenges that these segments face, particularly in terms of transformation and in providing the scalability required by top-tier clients... Anders Maehre, Datamonitor

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6 Interested in this topic? Datamonitor's IT Outsourcing & Services in FS Strategic Planning Program (SPP) is a tailored, continuous advisory service combining a number of information sources. Outsourcing remains one of the few short-term growth areas with the financial services industry. However, the key drivers behind outsourcing have changed. Deal closure times are increasing and concerns are growing over deal profitability. This SPP examines the IT services market across both systems integration and professional services with a particular focus on outsourcing. The SPP will analyse infrastructure, application and BPO opportunities across the financial services industry. Other reports available in this series Strategic Application Outsourcing: Zurich FS This brief analyzes the emerging strategic application outsourcing market and focuses on Zurich ' outsourcing agreement with CSC. Published: Jul-05 Product code: BFTC1176 Global Sourcing in European and North American FS The new paradigm of a global sourcing strategy must allow the FSI to decide what to outsource, when to outsource it and how to leverage and manage the maximum cost efficiency from the host of global outsourcing options available. Published: Apr-05 Product code: DMTC1048 Hedge Fund Technology and Service Provision Examines questions of the future shape of the hedge fund industry, and draws out implications for prime brokers, fund administrators and technology vendors. Published: Dec-04 Product code: BFTC1109 Sourcing Strategy Case Study: ABN AMRO This brief analyzes the ABN AMRO deal with EDS and strategic sourcing initiatives conducted internally reviewing implications for the wider financial services and vendor community citing best practice procedures from this and other outsourcing deals. Published: Dec-04 Product code: BFTC1003 For more information on reports and briefs go to: Subscribe to Monitor A monthly update of Datamonitor's new products, delivered to you by . monitor@datamonitor.com

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